Founded in a small garage by William Redington Hewlett and David Packard in 1939, The Hewlett-

Packard Company (HP) is a multinational American organization that develops a range of computer
hardware components. HP also provides software and IT-related services to SMEs and large
organizations and is headquartered in Palo Alto, California, US. As of 2014, HP’s net revenue was
recorded as US$115.5 billion and its cash flow for operations was US$12.3 billion.

HP primarily has seven basic R&D centers: in Palo Alto, California; Cambridge, Massachusetts;
Bristol, England; Galway, Ireland; Grenoble, France; Haifa, Israel; and Tokyo, Japan. These explore a
wide range of technologies more or less linked to its product range. Its Advanced Studies Research
Labs include a sub-group doing information theory research, linking the Mathematical Science Group
based in Bristol with experts at the US universities at Stanford and Berkeley. Grenoble specializes in
business PC design and development and Israel in image and document processing, among other
areas.

These centers of research excellence are linked to HP’s global product divisions, mainly
headquartered in the United States, and its national subsidiaries around the world, which
encompass most of its 85,500 employees.

The Palo Alto center pioneered HP’s thermal ink-jet technology, for example. Its Consumer Products
group, headquartered in San Diego, California, designed, developed, and led the manufacturing of a
range of imaging products using this technology. The firm’s subsidiary in Singapore customizes the
design and produces thermal ink-jet printers for the Japanese and Asian markets.

The R&D structure of the firm evolved a step further when the Singaporean subsidiary took the lead
from San Diego for the design, development, and manufacturing of a new range of portable ink-jet
printers. It had built up a range of specialist capabilities, through learning from other parts of the
internal network and through local Asian technical partnerships and subcontractors, which made it
the best place to lead innovation efforts in this area for the firm as a whole.

HP has developed a strong culture of creative innovation, going back to its roots as a garage-based
start-up. In addition to the “formal” R&D function, with its global network of R&D centers, HP
promotes innovation across all of its functions and employees. Continuous improvement of
technologies, products, services, and solutions which exploit new technological trends and match
these to the changing needs of customers is encouraged across the firm. HP focuses its efforts on
areas where it believes it can make a unique contribution, which at times also include forming
partnerships with other leading organizations.

In 2015 HP invested US$3.5 billion into R&D, up from US$3.45 billion in 2014 and US$3.14
billion in 2013. But the firm’s R&D investment as a percentage of sales (a standard measure of
R&D “intensity”) declined from 3.9 percent in 2006 to less than 3 percent in 2015.

With the help of its R&D centers, HP has recently been able to develop new products and
services around the cloud storage platform and related to “big data.” In 2015, HP opened an
87,000 ft2 Innovation Center in Ballybrit, Galway, Ireland, with a workforce of 700 engineers,
consultants, and support team. With the opening of this new Innovation Center, HP is striving to
become a leader in software R&D, cloud technology, and service innovation.
Conclusion

Even though HP’s expenditure on R&D has been increasing, it is still relatively low compared to
some of its competitors and particularly low as a percentage of sales. For example, Microsoft
spends approximately 13 percent of its revenues on R&D, IBM 5–7 percent, and SAP 14 percent.
However, in consecutive annual reports, HP states its intention to invest larger sums into R&D.
The central belief of HP’s founders, David Packard and William Hewlett, from the days of the
garage in Palo Alto, that investing in R&D to drive continuous innovation is necessary for long-
term competitive advantage, still runs strong.